4 Dream Homes, 4 Couples: Can They Afford The Price Tag?

For many of us, buying real estate is one of life’s biggest milestones.

Whether it’s purchasing your first home, a bigger home or an investment property, it’s critical to have your financial ducks in a row before you dive in. Or as someone who handles real estate for a living puts it:

“Buyers should carefully assess their finances before beginning their home search,” says Steve Brown, president of the National Association of Realtors. “By looking into their income, savings and credit reports, and collecting documentation of income and cash available, they can help avoid future problems when they’re trying to qualify for a mortgage.”

Want to know how much house you can potentially afford—and what pitfalls to avoid when you begin looking?

LearnVest spoke with four couples from across the U.S. who are looking to purchase real estate in the near future, as well as David Blaylock, a CFP® with LearnVest Planning Services, who weighed in on how each couple can better prepare for this important next step.

The First-Time Homeowners

Who: Steve Thomas*, 28, a software salesman and his wife, Sally, 29, who is looking for work as a Korean translator.

Location: San Jose, Calif.

What They Want to Buy: We’re looking to buy our first home together sometime in 2016. Ideally, the house will have two bedrooms, two baths and be located in a safe, quiet neighborhood within ten miles of work (preferably five so we can ride our bikes, save on gas and get some exercise).

The home doesn’t have to be turnkey, but we don’t want to have to do many repairs either. We have no children and aren’t planning on having any—but things could change, who knows.

Because of the high cost of real estate in San Jose, we’re considering moving to an area with similar weather and a lower cost of living. Sacramento, Houston, Austin or somewhere in Florida are all in the running.

We’re looking at spending $200,000 or less on a house. If we do get a mortgage, we’d like to pay it off in no more than 15 years. We don’t buy anything unless it’s on sale, and our house won’t be different. I actually blog about my frugal ways at Steveonomics.

Where They Stand: We should have $100,000 liquid at the end of next year. Our rent is reasonable—we have a great deal on a one-bedroom through a friend—so I don’t feel there’s a huge rush to jump into a big mortgage. If we save aggressively, we should have enough cash if we spot a great deal.